The Law of Unintended Consequences & Insurance

The Law of Unintended Consequences & Insurance

Thomas Stilp, JD, MBA/MM, LLM, MSC

There are certain reoccurring laws or rules of thumb (known as “decision heuristics”) that guide our behavior.  One rule, the “Law of Unintended Consequences,” is an odd rule because, by definition, the rule applies when we least expect it.

Take for example the military’s use of parachutes.  *A large parachute allowed the soldier to land more slowly, minimizing the chance of injury when hitting the ground.  But the military found that a larger parachute also made for a slower moving target, as soldiers became mid-air casualties.  The modern parachute now allows for safe deployment at extremely low (250 feet) altitudes.

More recently, in our legal field, there has been an interesting interplay between insurance and the Law of Unintended Consequences.

All insurance policies are basically the same.  The insurance company promises to make payment if certain things happen.  But all insurance policies commonly exclude coverage for “intentional” acts.  The exclusion makes sense – if the policy holder (the “insured”) intended to cause damage, then there should not be coverage.

In insurance lingo, a Policy of Insurance will only provide coverage for “damage that is neither expected nor intended from the standpoint of the insured.”  In other words, the insured did not mean for something to happen; it was an “accident.”

Simple enough.

But some recent court rulings can have some pretty bizarre results, becoming examples of the Law of Unintended Consequences.  A few examples make the point (adopted from D. Frangiamore, How Insurance Companies Settle Cases, §934 (2013)):

  • Doctor commits malpractice by amputating wrong leg.  The act of amputating the leg was intentional, even though it was a mistake.  There was no coverage.
  • A man threatens another who, in self-defense, hits him on the head causing severe injuries.  The man with injuries sues the other.  The act of hitting on the head was intentional, even though in self-defense.  There is no coverage or duty to defend the case.

Although no information is provided about the outcome of the last case, realistically, the attacker should lose his civil case, but that does avoid costs of defending the case to get to that point.

It is said that it is never the things we expect that make all the difference.

With a history of resolving large insurance claims, we are always mindful of the Law of Unintended Consequences, which has helped our clients collectively recover millions under their Policies.

As trusted legal counsel, we’ve represented businesses, professionals and entrepreneurs for over 30 years.

* (Retrieved at
One problem solved led to another problem made – hence, the Law of Unintended Consequences.